Firm Recovery during COVID-19: Six Stylized Facts

Abstract

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

Globally Engaged Firms in the COVID-19 Crisis

“…While an emerging set of studies is examining the set of policy measures that governments have relied on to help firms and households face the pandemic (e.g., Chetty et al, 2020;Kozeniauskas et al, 2020;Baldwin and Weder, 2020;Cirera et al, 2021a;Guerrero-Amezaga et al, 2022), we contribute to this literature by examining the differential access by globally engaged firms.…”

“…Following Cirera et al (2021a), an indicator of the severity of the crisis is constructed as a weighted average of the severity over 30-day periods since the start of the pandemic until the date of the survey.…”

“…We identify sectors for which an attribute is high through an indicator variable that takes the value of 1 for the fourth quartile of the given attribute as defined in Appendix A.3. For country heterogeneity analysis, we rely on the google mobility data to understand the initial severity of the lockdown, the income classification from the World Bank, and a GVC taxonomy developed in World Bank (2020) based on the extent of GVC participation, the goods and services exported, and measures of innovation, that differentiates 2 For the BPS round 1 and 2 questionnaires, see Apedo-Amah et al (2020) and Cirera et al (2021a), for the trade module introduced in wave 3 see Appendix D. For most countries, the sampling frame was based on censuses from Statistics Agencies, Ministries of Finance or Economy, or business listings from Business Associations, and typically only included businesses that could be found in some registers or listings. The WBES COVID-19 follow-up surveys, by design, cover only formal firms.…”

“…Business recovery from the pandemic is shown based on the latest round of the BPS data by (Cirera et al, 2021a), but the extent to which such recovery is felt by firms with global engagement is not known. The following key patterns emerge when comparing recovery for globally engaged firms with that of other firms.…”

“…Globally engaged firms, in particular, became the center of attention with the immediate decline in global trade after the outbreak of the pandemic (Brenton et al, 2022). But global trade bounced back sharply (Meijerink et al, 2020) unlike the more protracted 'U-shaped' recovery pattern in firm sales and other outcomes documented in Cirera et al (2021a). 1 The difference in the pattern of recovery for trade relative to sales and other economic outcomes at the firm-level raises two questions.…”